Dialogue: Innovating the Future

The Celanese brand first found fame in the fashionable years between the Roaring ’20s and World War II, not so much for its emerging industrial chemical business as for revolutionary innovations in man-made fiber spun into heart-racing, silky lingerie. Having started life in Basel, Switzerland, in 1912 and later operating as an aircraft paint specialist in Britain during World War I, the company eventually opened its first U.S. factory in 1918 as the American Cellulose & Chemical Manufacturing Co. Today, a flurry of mergers and owners later, Celanese is a $5 billion, publicly listed corporation with hundreds of innovative patents to its name and a reputation for developing leading-edge industrial chemicals and consumer products in more than 20 countries around the world.

A: Celanese truly is an international corporation. We have 30 production facilities around the globe in each of the major operating regions. I have responsibility for all of our operating businesses across the company — P&Ls, operations, manufacturing, sales. Our business organizations are responsible for operating these assets and meeting expectations from a performance standpoint, and also driving the strategy of each business and making sure it remains aligned with the corporate vision. I’ve had the good fortune to work through most operating units in the course of my career. It’s given me a pretty good view of what success can look like.

Q: What excites you about your role

A: It’s how we drive these businesses to the next level and the next stage of higher performance. We spend a significant amount of our time purely on what our strategy looks like — not just where we are today, but where we want to be and where we think we can be. That’s the most exciting part. You lay a direction. You lay a path. You put your strategic plans in place and then execute them. There’s nothing more satisfying than working with a collective group of business leaders to make things happen in order to realize the promise of the strategy.

Q: How do you drive these strategic plans?

A: We look at our strategies in four dimensions. We call them operating levers. Number one is continual productivity year over year. That goal has to be part of the DNA of an organization. It’s in all the things that you do, sometimes with the goal to offset inflation, particularly in the chemical industry, where inflation can be fairly significant.

The second lever is growth, specifically regional growth — how we look geographically across the world, how we follow our customers to Asia, creating a footprint that is balanced across the globe, and balanced in terms of our businesses, our cost structure, our strategic positioning of where our customers are, so that we can realize the benefits of growth.

The third lever is in the area of innovation. You can be a good technology-based company by doing some of your technology well, but we think great companies do everything well. Innovation is critical on the shop floor. But it is also critical in how we use our cash and our capital. It is critical in how we look at our markets and how we are able to use technology to differentiate our products in a way that gives us sustainable competitive advantage.

The last lever is to look out across the competitive landscape to spot acquisition opportunities, portfolio expansions, and understanding what we can add to the portfolio that’s going to further strengthen our competitive advantage.

Q: What keeps you awake at night?

A: Generally, I sleep well. But the things I think about, first and foremost, are making sure that we continue to attract, retain, and develop the right talent. You’ve got to have great leaders, whether they’re manufacturing, engineering, or scientists. You’ve got to have the very best people in order to be successful.

Having organizational agility is absolutely critical for us, not only how you structure the company, but also the talent that you’ve got that allows you to go off and think about things strategically five or 10 years ahead. We want folks who want to lead businesses, who want to be premier manufacturing executives, and they’ve got to be very agile globally. They’ve got to understand different cultures and how you draw the best out of those cultures within each of the major regions, and yet be bound by a single Celanese culture.

The second thing is complacency. We constantly try to drive and improve standards. It’s the notion that you can never really be satisfied. How do we keep organizations around the world continuing to drive for improvements to set standards higher? Those are the kinds of things we must engage in.

Q: How do you maintain these standards and drive leadership across such a diverse organization?

A: It gets down to where you ask your organizational leaders to spend their time. You are going to spend 30% of the time on those things that you must do in the near term over the next one to two years. Then you want to spend about 40% of your time on forward plans, things that you’re working on beyond the next couple of years to strengthen the company and the organization strategically. These are concrete concepts that we put plans and actions to. Whatever time is left, you’re really thinking even further out there. You’re thinking about long-term concepts and ideas. They don’t necessarily have plans put to them yet, but you need to ask the question, “Ultimately, where do I want my company to be in five to seven years?”

Q: That makes forward planning a central part of the role.

A: It’s a constant search, and we’re always in self-discovery, but it’s absolutely critical that you have a forward view and that we think about not just what is here today, but what could be, and what our customers are thinking. If you’re driving a car, you’ve got to be looking through the windshield, and not through the rearview mirror to where you were, but at what lies ahead — planning, anticipating, and understanding where you need to go.

You’ve also got to be capable, to some extent, of taking what I call “managed risks” and understanding that not all things are certain. But if you believe strongly that you’ve got leading technology, if you work with your customers closely for what they’re spending their time on, you tend to get a pretty good idea of where you need to be.

Q: So how do you drive innovation across the company?

A: Innovation is essential. But science projects by themselves don’t woo our shareholders. Technology for the sake of technology is interesting, but you typically don’t turn that into a source of differentiation or get paid for it.

Technology is the enabler. Let me again give you an example. Through technology we are capable today of getting more acetic acid — 1.5 million tons — out of a single reactor than anyone else in the world. That has given us a significant advantage in our operating costs, our raw material, our yields, the use of energy, and obviously you get the benefit of capital as well. That’s how technology enables us. But that didn’t just happen. That’s 30 years of developing the technology, iteration after iteration, generation after generation, and it reflects probably hundreds of patents. But it’s the continual investment that we make to ensure that the technology can sit as the centerpiece of any of the businesses that we operate.

Q: Do customers also help drive innovation?

A: We believe it is necessary to be close to our customers because that’s usually where ideas are created. We need to understand not just what they need now, but what they’re thinking about five years out or even 10 years out.

For example, we’ve got leading market technology in our Ticona engineering polymers business. We are recognized worldwide for being able to take very small, but complex, intricate parts for the auto industry or in electronics, and we work with our customers to design and mold these out of high-performance polymer materials. We work together to innovate. We also recently announced the development of an innovative, high-impact POM material, a plastic polymer compound, that now allows us to expand into what we think is an available market that didn’t exist one year ago. There are a lot of examples that bring us back to the criticality of innovation, and those are things that are done in conjunction with the customers.

You can’t be a technology leader or a global leader just based on size and scale. We envision competitive, sustainable advantage as being where you either have market leadership or you have technology leadership. That’s the only way to differentiate yourself long term.

Q: So do you see R&D as fundamental in this process?

A: Technology and R&D become absolutely critical. At times when the industry is cutting back to lower investments, we’re actually increasing our investments because we think it’s essential long term. It’s a tremendous opportunity today if you can be successful and continue to develop and build, whether it’s in products or processes. At some point, as we return to a more normalized world market, companies that invest in R&D are going to be better positioned.

Q: What drives your manufacturing strategy around the world?

A: Our manufacturing strategy is really built on a number of fundamental principles. It always begins with our focus on environmental health and safety and how we operate our plants. We don’t think you can separate those from strategy. You can’t be a reliable producer if you’re an unsafe producer. Then we look across all of our manufacturing operations. We focus on standardization, simplification, and digitization — how we can do more through investments in processes and systems that take out non-value-added work. You simplify and you standardize, and ultimately it drives you to remain very productive.

We’re also upgrading our technology and we’re always looking at our manufacturing footprint. We tend to look at what’s happening in the world and make sure that we’re optimized in our manufacturing. Our goal isn’t to have 25 or 30 sites around the world; our goal is to have the most optimal footprint where we can employ that capital productively.

Q: How has information technology helped change the corporate landscape?

A: I think the chemical industry, in general, not just Celanese, is a long way from where it was just a few years ago. Today, you can know, almost on a daily basis, what your order patterns look like, what your volumes are. Your update is less than 24 hours so you have real-time data and operate almost in a virtual world. When you’re dealing 14 time zones away from some of your leaders, you’ve got to have technology to link the world and to do it in a real-time way.

Where we can get advantage, we’ll digitize. As we simplify our work processes, digitization allows us to replace manually intensive processes. It helps us run our units more efficiently and optimally. When you’re in these chemical units, a small tweak in your yields has a major impact on how well you can improve your technology and convert those raw materials.

What’s scary is that technology changes so quickly. People get smarter. They take work out; they take time out; they add information. And that’s allowed this industry, especially with globalization, which is probably the largest challenge it’s had over the past 10 to 15 years, to be able to literally manage itself in a virtual world.

Q: What next-level technologies are you looking at?

A: A lot around our use of energy. We have set corporate sustainability goals, from 2005 to 2010, to reduce 25% to 30% of our greenhouse gas emissions, our waste, and other criteria. We’ve deployed technology that’s allowed us to reduce the consumption of those materials. We’ve also begun to explore alternative fuel technologies. At some sites in Europe, we already use wind technology. Now we’re preparing to set our next standards for the future. Technology and capital investment will play a critical part.

Q: Can new social networking technologies help your business?

A: We’re just discovering the potential of things like social networking, and we’re still trying to understand how you use them, particularly with our customer-interfacing businesses. I’d say it’s a great way that you can begin to enlist the public and potential consumers in helping to co-create products and drive your service improvements. You can go into the marketplace and you not only can inform potential consumers, but you tend to get some pretty good insights into what they are looking for, what works well, and what doesn’t.

Q: So how can global manufacturers better prepare for the future?

A: You’ve got to understand your strategy, know where your key investments need to be, improve your technologies, and understand what leading technologies you have. And use this period to invest in technology and R&D because you’re going to be better positioned when your normalized world volumes come back. It will make you stronger and more capable globally.

In the end, if you stay close to your customers, and you continue to look at where they’re going to be five, seven, eight years from now, and then use that directionally coming out of this period, I believe it can be a strong formula for future success. Some of the best work will be done now. Stay close to your customers and you’ll be stronger as a result.

Paul Tate is Research Director and Executive Editor with Frost & Sullivan's Manufacturing Leadership Council. He also directs the Manufacturing Leadership Council's Board of Governors, the Council's annual Critical Issues Agenda, and the Manufacturing Leadership Research Panel. Follow us on Twitter: @MfgExecutive